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impact of finance on business decisions

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Introduction

Unit 11-Impact of Finance on Business Decisions Introduction My name is Yathursan Devabalan. I am a sixth-form student at Woolwich Polytechnic School. I am currently studying Maths, Business and Economics. In business I am currently in the process of completing the coursework on 'Impact of finance on business decisions'. This coursework requires me to investigate how a business uses financial information to make decisions. So in this coursework I will look at the financial constraints faced by the business, the impacts the constraints have, I will analyse how the business monitor and control their operations of face such constraints and how they overcome them. I decided to investigate 'LH Turtle Limited' because I can find out financial information about them easily. 'LH Turtle Limited' is a family owned business that runs a hardware store situated in the centre of Croydon. Another reason why I chose 'LH Turtle Limited' is that I know several people who work there, so I can easily access financial information for it. 'LH Turtle Limited' is in a highly competitive market with likes of Focus, Wickes, BBQ and other DIY stores. ...read more.

Middle

Long-term financing is any investment into 'LH Turtle Limited' that does not need to be repaid within one financial year. There are several ways how 'LH Turtle Limited' can raise its finance. It can be raised internally or externally. The main sources of short-term finance for most businesses include the following: * Asset management: a firm may raise funds by selling off some of its existing assets such as machinery or fixtures and fittings. Because asset sales tend to reduce the ability of a firm to trade, this is a fairly drastic means of raising finance. Initially, 'LH Turtle Limited' will certainly not consider this as a way of raising finance; but if the business runs in to trouble; it can always be done. They could sell, for example less used fittings such as gardening tools, shelves and any other DIY supplies. If they are desperate I could sell certain assets and rent others for the short term. This is an internal source of finance. * Existing shareholders: the use of raising finance from existing shareholders remains an important and often principal source of finance for many private firms. ...read more.

Conclusion

So for example, LH Turtle could use some of their fixed assets as security against the loan. However, it is arguable whether the Bank would accept it, so LH Turtle could put for example a director's house as a security against the loan. In order to pay less interest every month they could take a long-term loan, this would mean they pay less interest every month than a short term loan but would pay a larger amount overall. This is an external source of finance. * Retained profits: 'LH Turtle Limited' can use the profits they have currently got to invest into developing the business. They can only use profits if their profits are greater than their running costs of the business. However, this is less likely as LH turtle currently not making enough profits for reinvestment into the business. In the long-term in order to boost profits they can cut their expenses by inviting tenders to all services the business buys or they can reduce the cost of sales by taking on cheaper less experienced staff. Then again this approach may not be beneficial as more experienced staff help the business improve. This is an internal source of finance. ...read more.

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